Practice Exam 6
(83) death benefits payable to a beneficiary under a life insurance policy are generally
not subject to income taxation by the federal government
(53) employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds
$50k
(4) in all health care plans under the affordable care act, how many essential benefit categories are there?
10
(117) all of the following are examples of violations of regulations pertaining to replacement EXCEPT 1. Intentionally answering a question incorrectly. 2. Unintentionally recording incorrect information. 3. Providing deceptive or misleading information. 4. Failing to ask the applicant questions regarding replacement.
Unintentionally recording incorrect information.
(129) what would disqualify an individual from receiving coverage through the marketplace?
being insured under an employer plan that meets the minimum value of healthcare costs
(55) which document is used to assess risk associated with an applicant's lifestyle and character?
investigative consumer report
(19) an employer's health care plan covers full-time employees only. after an employee's hours were reduced, the employee did not qualify for benefits but continued to receive services. when the health plan provider discovers the situation, they will
pay for the services received
(33) an absolute assignment is a
transfer of all ownership rights in a policy
(68) what type of account will most likely be established for a minor?
trust
(99) regarding the medical information bureau,
The information contained in MIB reports comes from the underwriting disclosures made by applicants to MIB member insurers on prior insurance applications.
(25) according to OBRA, what is the minimum number of employees required to constitute a large group?
100
(37) what is the penalty for IRA distributions that are below the required minimum for the year?
50%
(71) which of the following options best depicts how the eligibility of members for group health insurance is determined?
by conditions of employment
(6) an insured who has an accidental death and dismemberment policy loses her left arm in an accident. what type of benefit will she most likely receive from this policy?
capital amount in lump sum
(46) a producer who fails to segregate premium monies from his own personal funds is guilty of
comingling
(17) which of the following will NOT be an appropriate use of a deferred annuity?
creating an estate
(5) on a major medical insurance policy, the amount that an insured must pay on a claim before the insurer will pay is known as the
deductible
(90) regarding LTC coverage, as the elimination period gets shorter, the premium
gets higher
(13) if a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
guaranteed insurability rider
(11) regarding the issuance of group life insurance to labor unions
members CAN be excluded from coverage on the basis of insurability
(21) under the affordable care act, which classification applies to health plans based on the amount of covered costs?
metal level classification
(50) on a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are
not taxable since the IRS treats them as a return of a portion of the premium paid
(8) limited health insurance policies cover
only specific accidents or diseases
(47) what renewal option does NOT guarantee renewal and allows the insurance company to refuse renewal of a policy at any premium due date?
optionally renewable
(12) what describes specific information about a policy?
policy summary
(67) in the event of a loss, business overhead insurance will pay for
rent
(73) which type of life insurance policy generates immediate cash value?
single premium
(66) which of the following are responsible for making premium payments in an HMO plan?
subscribers
(3) what type of insurance can be obtained through SGLI by members of the armed forces?
term group life insurance (SGLI = servicemembers' group life insurance)
(42) when an annuity is written, whose life expectancy is taken into account?
the annuitant
(82) a corporation is the owner and beneficiary of the key person life policy. if the corporation collects the policy benefit, then
the benefit is received tax free
(93) when a fixed annuity owner pays a monthly premium to the insurance company, where is this money placed?
the insurance company's general account
(29) which provision states that the insurance company must pay medical expense claims immediately?
time of payment of claims
(23) what is the purpose of COBRA?
to provide continuation of coverage for terminated employees
(27) when may an insured deduct unreimbursed medical expenses paid under a long-term care policy?
when the expenses exceed a certain percentage of the insured's adjusted gross income
(65) if a life insurance policy develops cash value faster than a seven-pay test whole life contract, it becomes a
modified endowment contract (MEC)
(56) concerning group medical and dental insurance,
Employee benefits are NOT tax deductible
(79) what is NOT a cost-saving service in a medical plan?
denial of coverage
(52) an insured has a primary group health plan and an excess plan, each covering losses up to $10k. the insured suffered a loss of $15k. disregarding any copayments or deductibles, how much will the excess plan pay?
$5k
(113) how many hours of CE must a producer complete every 2 years?
24
(106) regarding occupational vs. nonoccupational coverage,
Disability insurance can be written as occupational or nonoccupational.
(74) T/F, regarding business overhead expense, benefits are usually limited to six months.
FALSE
(123) after a client leaves his office, an agent makes corrects to the client's application, but forgets to tell her. two weeks later, the client is in an accident. the insurer will be settling the claim based on the corrected form. this is
a violation of insurance code
(89) who can make changes to the policy once its in effect?
an executive officer of the insurer
(114) under what type of group life insurance policy may coverage be provided for eligible family members and dependents?
any group approved by the commissioner
(121) what should insurance companies do when creating advertisements for their products issued in this state?
as much as possible, eliminate footnotes and caveats, and describe terms in plain language
(10) in disability buy-sell coverage
benefits are NOT considered taxable income to the business
(108) an invalid use of business life insurance is
funding against the company's general loss
(59) regarding insurable risks,
insureds can be randomly selected, insurance can be mandatory, and insurable risk needs to be statistically predictable
(64) when a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
interest only
(75) if a deferred annuity is surrendered prematurely, a surrender charge is imposed. how is the surrender charge determined?
it is a percentage of the cash value and decreases over time
(120) which of the following best describes the unfair trade practice of defamation?
making derogatory oral statements about another insurer's financial condition
(130) what government program was originally designed to provide health insurance to maryland residents who are otherwise unable to secure coverage?
maryland health insurance plan
(101) shortly after a replacement transaction on a medicare supplement policy, the insured decided to cancel the policy, but is unsure whether the free look provision applies. the insured could find that information on the
notice regarding replacement
(109) how many pairs of glasses in a 12-month period will a vision expense insurance plan cover?
one
(110) regarding insurance policy loans,
policy loans can never be made on policies that do not accumulate cash value
(104) which of the following answers does NOT describe the principal goal of a PPO?
provide medical services only from physicians in the network
(126) who would receive a commission from the sale of a policy?
the agent who took the client's application
(112) who must approve rate changes for non-competitive types of insurance?
the commissioner
(105) when an employer offers group life insurance to its employees,
the cost of coverage is a deductible expense by the employer
(103) all of the following statements are true regarding mortgage protection insurance EXCEPT 1. The face amount decreases as the amount owed on the mortgage decreases. 2. It's a decreasing term insurance. 3. The face amount remains the same throughout the life of the policy. 4. It is used to pay off the balance on the mortgage.
the face amount remains the same throughout the life of the policy
(124) who assumes control over an insurance company's funds and management if it becomes insolvent?
the guarantee corporation
(128) which authority can legally suspend a licence?
the insurance commissioner
(116) licenses expire every 2 years on
the last day of the insurance producer's birth month
(107) in an adjustable life policy, all of the following can be changed by the policyowner EXCEPT 1. The length of coverage. 2. The premium. 3. The amount of insurance. 4. The type of investment.
the type of investment
(125) if an insurer charges a different premium rate and limits coverage for an applicant based on partial blindness ,the insurer may be found guilty of
unfair discrimination
(54) what are the authorities that an agent can hold?
express and implied
(87) a policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. this nontaxable transaction is called a
1035 exchange
(24) key employee disability income insurance benefits are
NOT taxable to the employer
(97) in a group long-term disability plan,
The benefit is based upon monthly income
(92) when an insurer offers services like preadmission testing, second opinions regarding surgery, and preventive care, which term would best apply?
case management provisions
(85) the purpose of managed care health plans is to
control health insurance claims expenses
(63) in group disability income insurance,
the extent of benefits is determined by the insured's income
(14) all the following statements are TRUE concerning debtor groups EXCEPT 1. an insurer may exclude any debtors as to whom evidence of individual insurability is not satisfactory to the insurer 2. the amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor 3. the debtors eligible for insurance under the policy shall all be the debtors of the creditor(s) 4. the premium for the policy shall be paid either from the creditor's funds, or from charges collected from the insured debtors, or from both
2
(2) all of the following statements about medicare part b are correct EXCEPT 1. it is financed by monthly premium 2. it is financed by tax revenues 3. it is a compulsory program 4. it covers services and supplies not covered by part a
its a compulsory (required) program
(81) the type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called
joint and survivor
(77) which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?
paid-up option
(84) when an insurer combines two periods of disability into one, the insured must have suffered a
recurrent disability
(72) which of the following services would be covered by endodontics?
root canal
(49) a producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. this is a personal use of life insurance known as
survivor protection
(100) an employee becomes insured under a PPO plan provided by his employer. if the insured decides to go to a physician who is not a PPO provider, what will happen?
the PPO will pay reduced benefits
(122) to qualify under maryland's health reform act of 1993 as a small employer, the private or public company must have how many employees?
2 to 50
(119) what is the license renewal period in this state?
2 years
(118) a prospective policyholder innocently makes a mistake on her application that could have large implications on what kinds of claims would be covered. if the insurer discovers this error, within what period of time would it be legal to deny a claim based on the correct information?
2 years after the date of issue
(9) following an injury, a policyowner covered under medicare parts a&b was treated by her physician on an outpatient basis. how much of her doctor's bill will she be required to pay out of pocket?
20% of covered charges over the deductible
(127) how many years after furnishing proof of loss does the insured have to take legal actions against the insurer?
3 years
(115) j is applying for his producer license. he took his written exam on 3/1 but failed it. when is the earliest he can take it?
3/5
(111) all health policies issued in this state must provide all of the following benefits related to adopted children EXCEPT 1. Coverage is provided to the same extent as for any natural children of the insured. 2. Coverage may begin on the date the petition for adoption is filed. 3. Coverage for adopted children may be excluded at the discretion of the insurer. 4. Cover delivery and obstetrical expenses for the birth mother.
Coverage for adopted children may be excluded at the discretion of the insurer.
(70) regarding the issuance of group life insurance to labor unions,
Members can be excluded from coverage on the basis of insurability.
(88) the term "illustration" in a life insurance policy refers to
a presentation of nonguaranteed elements of a policy
(80) a straight life policy has what type of premium?
a level annual premium for the life of the insured
(102) where would LTC services be rendered?
a nursing home or one's own home
(38) employer health plans must provide primary coverage for individuals with end-stage renal disease before medicare becomes primary for how many months?
30 months
(94) when an insured purchased her disability income policy, she misstated her age to the agent. she old the agent that she was 30 years old when she was 37. if the policy contains the optional misstatement of age provision
amounts payable under the policy will reflect the insured's correct age
(58) if an insurance company makes a statement that its policies are guaranteed by the existence of the insurance guarantee association, that would be considered
an unfair trade practice
(40) a 60-year-old participant in a 401k plan takes a distribution and rolls it over to an IRA within 60 days. what happened?
because the funds were not transferred from trustee to trustee, the amount of the distribution is reduced by the amount of a 20% withholding tax
(30) all of the following are true about group disability income insurance:
benefits are usually short term, the waiting period starts at the onset of the injury or sickness, the longer the waiting period, the lower the premium, and coverage applies only to occurrences while on the job
(35) what qualifications must an agent hold in order to sell variable life insurance policies?
both state and federal licensing
(98) who must sign the notice regarding replacement of policy?
both the applicant and the agent
(20) what required provision protects against unintentional lapse of policy?
grace period
(34) as it pertains to group health insurance, COBRA stipulates that
group coverage must be extended for terminated employees up to a certain period of time at the former employee's expense
(69) what kind of policy issues certificate of insurance to insureds?
group insurance
(91) what method of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?
human life value approach
(86) the premium of a survivorship life policy compared with that of a joint life policy would be
lower
(1) which of the following is NOT true regarding the annuitant? 1. the annuitant's life expectancy is taken into consideration for the annuity 2. the annuitant receives the annuity benefits 3. the annuitant must be a natural person 4. the annuitant cannot be the same person as the annuity owner
the annuitant cannot be the same person as the annuity owner
(15) if a beneficiary is NOT named for annuity benefits, to which entity will the benefit be paid?
the annuitant's estate
(28) if a life insurance policy has an irrevocable beneficiary designation,
the beneficiary can only be changed with written permission of the beneficiary
(32) a health insurance policy does NOT cover
war-related injuries
(57) which of the following is NOT an example of insurable interest?
a debtor does not have insurable interest in a creditor
(76) according to the provisions of the patient protection and ACA, which of the following are not required preventive care services? 1. Cervical cancer exams for all women starting at age 40. 2. Diet counseling for adults. 3. Well-woman visits and counseling. 4. Screenings for autism and behavioral disorders in children.
cervical cancer exams for all women starting at age 40 (only available to women at higher risk)
(36) an applicant buys a nonqualified annuity, but dies before the starting date. for which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable?
if the beneficiary is a spouse, interest is tax deferred
(7) all of the following are true of key person insurance EXCEPT 1. there is no limitation on the number of key employee plans in force at any one time 2. the employer is the owner, payor, and beneficiary of the policy 3. the key employee is the insured 4. the plan is funded by permanent insurance only
the plan is funded by permanent insurance only
(96) in order for costs to be covered under a dental plan, what is the minimum interval that must pass between routine dental exams?
6 months
(41) which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
universal life
(44) what kind of policy allows withdrawals or partial surrenders?
universal life
(62) which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
warranty
(61) regarding LTC insurance,
every policy must offer nonforfeiture benefits to the applicant
(18) which of the following is NOT true of section 1035 policy exchanges? 1. it requires an absolute assignment of the existing policy to the replacing company who surrenders the contract and issues a replacement policy 2. it is an IRS code which permits like kind exchanges of property 3. it is typically used when exchanging or replacing a less competitive life policy with a more competitive life policy 4. any exchange made under section 1035 of the internal revenue code must be completed within 30 days
4
(26) regarding the living needs rider,
a diagnosis must indicate that death is expected within 6 to 24 months
(22) in underwriting a substandard risk,
a higher premium will be charged
(78) when must insurable interest exist in a life insurance policy?
at the time of application
(60) what would not be used in preventive care?
chemotherapy
(16) when both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is
conditional
(95) the death benefit in a variable universal life policy
depends on the performance of a separate account
(31) annually renewable term policies provide a level death benefit for a premium that
increases annually
(39) the medical information bureau was created to protect
insurance companies from adverse selection by high risk persons
(43) an insured buys a 5-year level premium term policy with a face amount of $10k. the policy also contains a renewability and convertibility options. when the insured renews the policy in 5 years, what will happen to the premium?
it will increase because the insured will be 5 years older than when the policy was originally written
(45) an insured has a continuous premium whole life policy. she would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. what dividend option could she use?
paid-up option
(51) what is the benefit of experience rating?
it helps employers with low claims experience to get lower premiums
(48) what annuity feature makes it a suitable source of retirement income?
annuities may provide income that the annuitant cannot outlive